In January, the United States saw an unforeseen rise in manufacturing activity, although it continues to demonstrate contraction, according to a report from the Institute for Supply Management. The report indicates that the manufacturing PMI climbed to 49.1 in January, up from the 47.1 seen in December. However, any figure below 50 signifies contraction. Economists had predicted the index to decrease slightly to 47.0, instead of the 47.4 reported for December.
This unexpected growth has resulted in the highest manufacturing PMI reading since its last peak of 50.0 in October 2022. This unexpected increase was largely due to a significant recovery in new orders, with the newly suggested index leaping to 52.5 in January, a dramatic increase from December's 47.0.
The production index also slightly rose to 50.4 in January, up from December's 49.9, returning to expansion after two months of contraction. However, the employment index fell to 47.1 in January from December's 47.5, signifying a faster contraction rate in the employment in the manufacturing sector.
There was also a notable change in prices, with the prices index surging to 52.9 in January, up from 45.2 in December. The sharp increase in the prices index suggests raw material prices rose in January, following eight months of continuous decline.
Will Compernolle, Macro Strategist at FHN Financial, commented on the report saying, "The January manufacturing survey issued by the ISM has not suggested any noticeable slowdown in the economy at the start of 2024." He continued, noting that "Potential upside risks to goods inflation could occur due to an increase in the prices paid component, particularly as global supply chains face disruption from violence near the Red Sea."
The Institute for Supply Management has planned to release a separate report on United States' service sector activity for January, on the following Monday.
